Ownership Presumption for Seized Cash Is Rebutted by Credible Company Records, Preventing Unexplained-Money Taxation in Individual Hands
Timely issuance and recorded service of a scrutiny notice within the statutory period preserve assessment validity where no evidence disproves service or identifies another mandatory breach. For unexplained-money treatment, possession creates only a rebuttable presumption of ownership. A consistent search-stage explanation that cash was held in safe custody for an employer, supported by the employer's cash book and audited accounts, rebuts that presumption unless the revenue discredits those records or proves personal ownership. The cash is therefore not assessable in the individual's hands as unexplained money, and the consequential special tax treatment does not arise.
Issues: (i) Whether the assessment was invalid for want of a valid and timely notice under section 143(2) of the Income-tax Act, 1961; (ii) Whether cash seized from the assessee's residence was liable to be assessed as unexplained money under section 69A of the Income-tax Act, 1961.
Issue (i): Whether the assessment was invalid for want of a valid and timely notice under section 143(2) of the Income-tax Act, 1961.
Analysis: The return was furnished during financial year 2019-20. The notice was issued on 19.09.2020 and recorded as duly served, within the prescribed period ending on 30.09.2020. No material disproved service, and the general challenge did not identify any other mandatory breach.
Conclusion: The notice was valid and timely, and the assessment was not invalid on this ground; against the assessee.
Issue (ii): Whether cash seized from the assessee's residence was liable to be assessed as unexplained money under section 69A of the Income-tax Act, 1961.
Analysis: Section 69A requires that the assessee be the owner of money not recorded in the books and fail to provide a satisfactory explanation of its nature and source. Although possession raises a rebuttable presumption of ownership, the explanation that the cash belonged to the employer company was given during the search and remained consistent. The company cash book and audited accounts recorded the seized sum as cash seized by the Income Tax Department. The absence of a withdrawal entry did not contradict the explanation of safe custody, and no finding discredited the company records or established that the cash belonged to the assessee.
Conclusion: The presumption of ownership stood rebutted; the assessee was not the owner of the seized cash for section 69A purposes, and the addition was liable to be deleted; in favour of the assessee.
Final Conclusion: While the assessment remained jurisdictionally valid, the disputed cash could not be assessed as unexplained money in the assessee's hands, and the consequential application of section 115BBE did not arise.
Ratio Decidendi: A possession-based presumption of ownership under section 69A is rebutted where a contemporaneous and consistent explanation is supported by credible books and audited accounts of the person claiming ownership, and the Revenue does not discredit that evidence.